Making your first major investment can be quite an exciting and daunting task at the same time. Investing in mutual funds, especially, is not as easy as it sounds if you’re not used the world of investments and equity. Many a times, investors can end up in a financial soup just because they invested in a mutual fund without understanding completely the implications of what they are doing.
With the new fiscal year almost on the horizon, many of you may be gearing up to make new investments and are probably looking for better mutual fund options to add to your portfolio. However, regardless of which mutual fund you’re planning to invest in, there are certain things that you as an investor must avoid under any circumstance. Here’s a look at 7 mistakes you must avoid while making mutual fund investments.
- Trying To Predict The Market
The market is not a game of who invests first or who invests last. If your financial plan requires you to invest in a mutual fund, waiting for the ‘right time’ isn’t really going to help you. Why? Because there is no right time. The market doesn’t wait for you to invest before it starts rising, neither does it tell you that it’s going to fall soon. Whatever happens to the market, your only responsibility is to make sure you’re making the investments you’re supposed to make, and not wasting your time by letting your money sit idle till you ‘feel’ that the time is right.
- Investing In Too Many Schemes
Simply investing in multiple schemes is not going to help you as an investor at all. There should be a clear-cut reason for investing every rupee that you have so painstakingly earned. Having countless investments doesn’t mean that you’ll be safe if some of them go bust. It only exposes you to more risk than you might be comfortable handling; each investment literally ends up becoming a liability if you don’t invest smart.
- Not Reviewing Your Portfolio
If you’ve already made a few investments before, make sure that you monitor and review your portfolio regularly, even after you make your mutual fund investment. Without constantly monitoring your portfolio you’ll never know if your investment in the mutual fund is even going to help. Take help from a certified financial planner, they can give you regular updates on your portfolio in easy-to-understand and easy-to-consume reports which an offer valuable insights into your investments.
- Putting All Your Eggs In One Basket
Just like you shouldn’t invest in a horde of mutual fund schemes, don’t invest all your money in just one scheme. Yes, this can get a little confusing; knowing where to invest and how much to invest is something that you will pick up along the way, but till then, feel free to talk to a certified financial planner or a wealth management firm to help you identify exactly where you should be putting your money.
- Investing Everything At Once
DO NOT dump your savings and wealth into investments all at once. Start small, and gradually keep increasing the amount of money you can invest as you start to understand how this works. Remember to be very careful while investing your money; refrain from taking drastic financial decisions on your own or listening to anecdotal advice from your family and friends. If you’re not sure about what to do with your money, it’s better to keep it where it is or wait till you speak to a professional like a certified financial planner who can give you an unbiased opinion on what you should do with your money.
- Only Worrying About Asset Allocation
If all you’re thinking of is asset allocation you’ll end up making investments that might not help you achieve your financial goals, and in the worst case scenario, leave you without usable capital when you really need it. Yes, asset allocation is important, but as we’ll learn in the next point, your financial goals are way more important.
- Ignoring Your Financial Goals
Mutual funds are one of the best investment options available to new and seasoned investors in India. While their returns can look very attractive, and may even compel you to make an investment you may not necessarily need, don’t compromise on your financial goals just to make a quick buck. Instead look for mutual fund options that help you work towards your financial goals. At the end of the day, your financial goals are tied very closely to your personal goals. If you miss out on achieving your financial goals, you’ll most probably end up not meeting your personal goals as well, especially those that require a significant amount of capital to materialize.